Markets ‘distorted, wrecked’, says Chidambaram

New Delhi, April 29 (IANS) Calling the markets “distorted and wrecked”, Finance Minister P. Chidambaram Tuesday promised administrative steps to rein in prices, that has pushed up India’s annual inflation rate to a 40-month high. “The government cannot be seen idle or inactive. To back the financial measures, the government will initiate administrative measures if needed to check inflation,” Chidambaram told the annual session of the Confederation of Indian Industry (CII) here.

“The markets are distorted and wrecked. The government is ready to set up administrative mechanism if the pleas for containing inflation are not heeded. We must work together to overcome the current phase of inflation and promote inclusive growth.”

He, however, said that there was “no textbook answer” to the problem of inflation - a point emphasised by Planning Commission Deputy Chairman Montek Singh Ahluwalia, who saw prices abating only over the next few weeks.

“Micro economy is quite conducive and inflation will certainly come down. The slowdown in world economy has led to high rise in food prices. The government is committed to handling inflation effectively,” Ahluwalia said.

The comments came in the backdrop of the monetary and credit policy for the current fiscal announced by the Reserve Bank of India, which hiked the cash reserve ratio by another 25 basis points, but kept all the other key rates intact.

Chidambaram said that all the good works of the government like the National Rural Employment Guarantee (NREG) scheme and the National Rural Health Mission (NRHM) were being overshadowed by inflation.

“The government cannot allow inflation to wipe out all good works. We are determined to check inflation. The battle of inflation must be fought together,” he said.

“Yet a section of industry believe in exclusive growth,” Chidambaram said, adding that the industry must respond to the need for inclusive growth when “parliament, government and people” were vying for it.

The finance minister said that the country would register a growth rate of over 8 percent in 2008-09, though the economy was faced with an altogether different situation.

“It is a year of multiple crises - food, fuel, financial and fiscal - at the global level. Crude oil is costing $120 per barrel today. We are still confident to preserve and maintain high growth rate. The government continues to subsidise petrol, diesel, kerosene, and liquefied petroleum gas.”

Chidambaram said that the country could not afford to grow at less than 9 percent, and “I am happy to say that we have not yet lost the momentum of growth”.